International Business Strategy 301LON Functional Area Excellence I M & IHRM Unit: 5 Knowledgecast: 2

Communicate an in-depth understanding of the complexity of the environment and its applications on decision-making process Assess current developments in the organisational environment and alternative responses related to strategy Module Learning Outcomes

Organizing Framework for Marketing in the International Firm

Market Segmentation The process of dividing the firm’s total customer base into homogeneous clusters that allows management to formulate unique marketing strategies for each group. Within each market segment, customers exhibit similar characteristics, including income level, lifestyle, demographic profile, or desired product benefits. Internationally, common market segment variables include income level, culture, legal system, etc.

Global Market Segment A group of customers that share common characteristics across many national markets. Firms target these buyers with relatively uniform marketing programs, regarding product, pricing, communications, and distribution Such segments often follow global media, embrace new fashions or trends, and have much disposable income. Examples Young people worldwide (e.g., MTV, Levi’s) The global segment of jet-setting business executives People worldwide with elevated cholesterol (e.g., Pfizer and Lipitor)

Standardization and Adaptation Adaptation: Modifying elements of the marketing program to accommodate specific customer requirements in individual foreign markets E.g., industries in automaking, publishing, furniture Standardization: Efforts to make marketing program elements uniform, so as to target entire regions of countries, or even the global marketplace, with a similar product or service Targeting the same product everywhere not usually feasible Goal: To strike some ideal balance between adaptation and standardization

Tradeoffs Between Standardization and Adaptation Adaptation is pursued when the market has unique characteristics based on language, culture, regulations, income level, economic conditions, infrastructure Complete Standardization Complete Adaptation Standardization is pursued when: Global market segments exist Products have universal specifications (as in industrial products) Advantages: Meet customer needs more precisely Differentiate products Comply with government regulations Advantages: Cut costs Improve planning and control Do global branding

Global Product Development & Branding In developing international products, managers emphasize their commonalities across countries rather than the differences between them. A basic product incorporates only core features that are then varied at the margins for individual markets. A global new-product planning team is a group within a firm that determines which product elements will be standardized and which will be adapted locally, and how products will be launched. Well-known global brands include: Electronics (Playstation), personal care products (Gillette), toys (Barbie), food (Cadbury), beverages (Heineken), credit cards (Visa), movies (e.g., Star Wars), pop stars (Shakira), and sports stars (David Beckham). A strong global brand enhances:  Efficiency and effectiveness of marketing programs  The ability to charge premium prices  The firm’s leverage with resellers  Brand loyalty  Trust and confidence in the product Well-known global brands include: Electronics (Playstation), personal care products (Gillette), toys (Barbie), food (Cadbury), beverages (Heineken), credit cards (Visa), movies (e.g., Star Wars), pop stars (Shakira), and sports stars (David Beckham). A strong global brand enhances:  Efficiency and effectiveness of marketing programs  The ability to charge premium prices  The firm’s leverage with resellers  Brand loyalty  Trust and confidence in the product

International Pricing Pricing is complex in international business, due to multiple currencies, trade barriers, added costs, and typically longer distribution channels. Prices affect sales and profits. An inverse relationship often exists between profits and market share. Firms face pressure to lower prices abroad, mainly due to lower income levels. Conversely, prices can escalate due to tariffs, taxes, transportation, intermediary markups, and after-sales service. € ₤ ¥ $

Factors That Affect International Pricing Nature of the market: Local purchasing power and distribution infrastructure are important factors. Nature of the product or industry: A specialized or highly advanced product, or an industry with few competitors, may necessitate charging a higher price. Type of distribution system: Channels are complex in some countries, which pushes prices up. Location of the production facility: Locating manufacturing near customers or in countries with low-cost labor facilitates lower prices.

International Advertising Firms conduct advertising via media, which includes direct mail, radio, television, cinema, billboards, transit, print media, and the Internet. Advertising spending on major media amounted to $100 billion in both Western Europe and Asia. In the United States, advertising expenditures totaled over $160 billion. Advertising is influenced by local factors, such as availability of media, literacy, regulations, culture, and local customs, as well as the goals of the firm.

Media Characteristics in Selected Countries

International Human Resource Management “The planning, selection, training,employment and evaluation of employees for international operations.” (Cavusgil et al, 2007:548) How a firm recruits, trains, and places skilled personnel in its worldwide value chains sets it apart from its competition.

Challenges of International Human Resource Management Recruiting, managing, and retaining human resources at a firm with extensive global operations is especially challenging. For example, German firm Siemens has more than 400,000 employees in some 190 countries: 230,000 throughout Europe, 90,000 in the Americas, 70,000 in the Asia-Pacific region, and 12,000 in Africa, the Middle East, and Russia. Volkswagen, Nestle, IBM, Unilever, Wal-mart, McDonald’s, and Matsushita each has more than 150,000 employees outside the firm’s home country.

Three Employee Categories Host Country Nationals (HNCs) Parent Country Nationals (PCNs) Third Country Nationals (TCNs)

Complexity of IHRM Complexity Greater involvement in employees lives The need for a broader perspective New HR Responsibilities External influences Greater risk exposure Managing diversity

Differences Between Domestic and International IHRM 1. New HR responsibilities, such as international taxation, international relocation and orientation, services for expatriates, host government relations, and language translation services 2. Need for a broader perspective, such as establishing fair, comparable compensation, when there is a mix of PCNs, HCNs, and TCNs 3. Greater involvement in employees’ personal lives, such as housing arrangements, health care, children’s education, safety, security, appropriate compensation, and higher living costs

Differences Between Domestic and International IHRM 4. Managing the mix of expatriates versus locals. Each location may be staffed with a mix of HCNs, PCNs, and TCNs, depending on firm’s international experience, cost of living abroad, local laws, and availability of qualified local staff. 5. Greater risk exposure, such as political risk and terrorism 6.External influences of government and culture, such as taxes, local work regulations, traditional work practices, and cultural conditions

Key Tasks of IHRM 1. International staffing policy: Activities directed at recruiting, selecting, and placing employees 2.Preparation and training of international employees 3. International performance appraisal: Providing feedback for employees’ professional development 4. Compensation of employees: Includes formulation of benefit packages that vary greatly from country to country 5. International labor relations: Managing relationships with unions; collective bargaining processes, known as industrial relations 6.Diversity in the international workforce

Communicate an in-depth understanding of the complexity of the environment and its applications on decision-making process Huge complexity in managing diverse human resource Assess current developments in the organisational environment and alternative responses related to strategy Knowledgecast Summary

Seminar Review of Article M. Ayhan Kose and Eswar S. Prasad (2010), Emerging Markets Come of Age, Finance and Development Journal, 2010 Prepare to review this article in your seminar for this unit. You should make written notes to bring to the seminar to support your contributions. Guide Questions. a.What are the key changing drivers of global growth? b. Are emerging economies really in control of their destiny? WHY? c. What are the factors responsible for the relative resilience of emerging economies during the global recession?

Environmental Audit – Preparation Assignment Preparation – Research You have an opportunity to use this time to continue to gather information regarding the environmental audit of your case study organisation, which will be invaluable in preparing you for the first assignment. Assignment Preparation – Rehearsal You should also use this opportunity to rehearse your presentation of finding from the environmental analysis of your case organisation. Remember to have several practice sessions and reflect on your individual and group performance. Group Activity